Wharton Proposes 14-Cent Tax Hike Above Recertified Rate

By Bill Dries

The administration of Memphis Mayor A C Wharton Jr. is proposing a 14-cent city property tax hike on top of the 25 cents added to the current rate of $3.11 to compensate for property value lost in the 2013 property reappraisal.

The combined tax rate of $3.51, the city’s property tax rate in 2009, was unveiled in a Tuesday, June 4, council committee session in which Wharton’s directors talked in more detail about changes in employee and retiree benefits the administration took to council members last Friday.

The 14-cent city property tax hike proposal debuted the day after the Shelby County Commission approved a six-cent county property tax hike ordinance on the first of three readings.

In April, Wharton had proposed a recertified tax rate of $3.36 with no tax hike beyond what he said was needed to produce the same amount of revenue for city government.

Chief administrative officer George Little and city finance director Brian Collins told the council the reworked budget remains a “continuation budget” with no new spending. But they said the 14 cents on the tax rate is needed to close gaps on debt and pension and benefit obligations cited in a state comptroller’s report.

In making fixes recommended by the administration specifically to address those concerns the council used $11 million from the city’s reserve fund and replenishing that amount is part of the consideration.

The changes in benefits drew municipal labor unions to a Tuesday morning budget committee session with union leaders saying the changes violate agreements between the unions and the administration.

The budget reset plan that would save the city an estimated $41 million over five years.

It includes 400 layoffs through a buyout plan that Wharton’s proposal, delivered to council members Friday, indicates would require $14 million in “seed money.”

The cut in the city’s headcount would be all in the fiscal year that begins July 1 and would save the city an estimated $11 million.

Also in the fiscal year to come, Wharton is recommending an end to college incentive pay for city employees that amounts to another $6.2 million and eliminating longevity pay for city employees for another $1.7 million in savings.

The largest single amount of savings in the plan is $10 million to $16 million over five years with a cut of Medicare Part B benefits for city retirees.

Pension reforms for the fiscal year that begins July 1, 2014 suggested by Wharton include freezing cost of living adjustments for city employees until the city’s pensions fund is at the 100 percent funded mark. That would start with no cost of living raise in that fiscal year for an annual impact of $15.4 million toward the pension funding.

The city would increase the real estate investments in its pension asset allocation from five per cent to 10 percent. And the city would move all pension employees with less than a decade of service to a direct contribution plan. There are no savings estimates for either one of those measures which would take effect July 1, 2014.

Wharton proposed in April, and the reworked budget still includes, a 2.3 percent pay raise for all city employees that would begin in January, halfway through the fiscal year. It is a $3 million line item.

Wharton’s new recommendations just weeks before the end of the current fiscal year are a reaction to a report from the state comptroller’s office critical of the city’s finances. Released last month, the report is particularly critical of the city’s handling of its pension and other post-employment benefits obligations as well as the city’s debt from a 2010 restructuring and refunding bonds issue. The council is still scheduled to vote later this month on a second similar restructuring that would push the city’s bond debt even further out.

The council last month approved a set of resolutions that moved around $54 million, including using $11 million from the city’s reserve fund to meet conditions set by the comptroller’s office. Without the actions, state regulators said they would refuse to allow the city to issue any more debt, which is used to finance one-time construction and renovation projects.

Council budget committee chairman Jim Strickland said Monday he will propose delaying a vote on the operating budget until the June 18 council session and setting a special council session for June 25.

The mayor’s proposal will have company during council committee sessions Tuesday as six council members roll out budget alternatives of their own.

Council member Harold Collins proposes $9.5 million in cuts, including closing the Memphis Animal Shelter, eliminating one of two police recruit classes Police Director Toney Armstrong has slated for the new fiscal year, cuts in funding to the Economic Development Growth Engine and eliminating all funded vacancies in the operating budget.

The animal shelter is the biggest dollar amount on Collins’ list, coming in at $2.7 million, followed closely by the funded vacancies at $2.6 million.

Council member Lee Harris would eliminate all $2.1 million in city funding for EDGE which he has said amounts to “corporate welfare.” His other cuts include $10 million of $20.1 million in capital funding for sewer extensions in annexation areas.

Council member Wanda Halbert’s proposal includes restoring the full 4.6 percent pay cut all city employees took two years ago and “absolutely no employee layoffs.”

Halbert’s plan would review city spending on all shared agreements with Shelby County government and freeze all “new non-emergency operation and capital requests” for at least a year and do away with all outsourcing of non emergency services. The freeze on the requests and the outsourcing could be thawed out in case of an emergency but only with approval from the council.

Council member Janis Fullilove proposed adding $1 million to the operating budget for domestic violence programs at the YWCA and capital funding of $3.4 million for a Cooper-Young parking garage and $1.5 million toward renovation of Southbrook Mall.

Council member Kemp Conrad would cut the solid waste budget by $17 million and leave the method to the administration between two options that both mean further privatization of sanitation services.

The first would reduce the solid waste fee Memphians pay by 20 percent, or $12 million, saving households $60 a year and using $5 million in the public works budget to go to the general fund to be spent on blight relief.

The second option drops the fee by the full $17 million, translating to an $85 savings a year per household on the fee.

Council chairman Edmund Ford estimates a $12 million savings from the transfer of street lighting to Memphis Light, Gas and Water Division that is already on Tuesday’s council agenda for third and final reading as an ordinance.

With those savings, Ford would fund a library strategic plan to increase staff and collections budgets to $2.8 million, restore community center hours for $1.2 million and add the code enforcement workforce for $1.2 million. That would leave $6.7 million from the streetlight savings. There would also be $9.7 million in capital spending in Ford’s plan to get the city on a 30-year paving cycle.